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Duty-Free Import Threshold Could be Lowered Under New NAFTA

Friday, November 09, 2018
Sandler, Travis & Rosenberg Trade Report

More than a dozen major trade associations are protesting a provision in the U.S.-Mexico-Canada Trade Agreement that would allow the U.S. to lower the value of imports below which goods may enter duty-free to the levels maintained by Canada and Mexico. The groups said such a change “would harm American businesses, workers, and consumers, reduce incentives to improve U.S. e-commerce infrastructure and undermine U.S. global leadership in e-commerce policy.”

The U.S. raised its so-called de minimis amount from $200 to $800 in 2016. In a Nov. 6 letter to U.S. Trade Representative Robert Lighthizer, the trade groups said this increase facilitates faster border clearance for imports of low-value goods that small businesses use for assembly and value-added manufacturing operations, thus boosting their bottom lines. It also benefits high- technology component manufacturers and apparel, textile, and other retailers that import samples, the letter said, as well as consumers who gain faster, less-expensive access to a wider range of goods.

In the newly-concluded USMCA, Canada agreed to raise its de minimis level from C$20 to C$40 for taxes and provide for duty-free shipments up to C$150. Mexico pledged to continue to provide US$50 tax-free de minimis and provide duty-free shipments up to the equivalent level of US$117. However, a footnote in the customs and trade facilitation chapter of the agreement states that if Canada or Mexico maintains a lower de minimis value than the U.S., the U.S. may lower its corresponding value for shipments from that country to “a reciprocal amount.”

The trade groups said such a move would have negative consequences. U.S. businesses have increased investments in domestic infrastructure to support the growth of e-commerce and consumer demand since the de minimis value was increased in 2016, the letter said, and reversing that change now would lessen incentives for such investments, which benefit U.S. exporters, e-commerce companies, and consumers. It would also impede the U.S.’ ability to seek commitments on new trade facilitation measures by other countries, impose significant administrative costs on small businesses, and generate unnecessary paperwork requirements in exchange for a small amount of duty collection.

As a result, the letter asked Lighthizer to remove the footnote at issue and work with his counterparts in Canada and Mexico to ensure those countries do not implement the USMCA in a way that reduces or withdraws existing trade facilitating measures.

[Click here to register for ST&R’s upcoming webinar on the treatment of textile and apparel goods in the USMCA.]

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